Loopholeshttp://www.businessinsider.com/category/loopholes
en-usSun, 02 Aug 2015 19:02:58 -0400Sun, 02 Aug 2015 19:02:58 -0400The latest news on Loopholes from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/social-security-spousal-benefit-2015-6A reporter scored $50,000 for retirement thanks to a loophole some couples could usehttp://www.businessinsider.com/social-security-spousal-benefit-2015-6
Wed, 24 Jun 2015 17:00:00 -0400Business Insider
<p><img style="float:right;" src="http://static4.businessinsider.com/image/55831d106bb3f737392d1750-1065-799/wealthy-old-couple-3.jpg" border="0" alt="Wealthy Old Couple"></p><p>A loophole in the Social Security Act could give married couples up to an extra $50,000, reports NPR correspondent David Kestenbaum in a <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">Planet Money podcast episode.</a></p>
<p>This loophole, which economist Larry Kotlikoff and reporter Paul Solman write about in their book, "<a href="http://www.amazon.com/Get-Whats-Yours-Secrets-Security/dp/1476772290">Get What's Yours: The Secrets to Maxing Out Your Social Security</a>," is all thanks to something called a spousal benefit.</p>
<p>"The spousal benefit dates back to the early days of the Social Security program, when women tended to stay at home and take care of the kids," <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">reports</a> Kestenbaum for NPR. "It was a way for wives to get something out of the Social Security as well as the husbands."</p>
<p>While you're waiting to collect your Social Security — which you can receive starting at age 62, but <a href="http://www.businessinsider.com/delay-claiming-social-security-benefits-2015-2">may want to defer until age 70 to get a much larger check</a> — you can also file for additional money: the spousal benefit.</p>
<p>The way the Social Security Act is written, one spouse can begin claiming regular benefits starting at age 62, while the other spouse claims spousal benefits. As the latter spouse gets this additional money, his or her standard benefits continue growing until claimed at age 70.</p>
<p>Before writing about this trick in "Get What's Yours," Solman did some research, found a few couples who did it, and decided to give it a whirl with his wife.</p>
<p>"I simply made a date to talk to the Social Security people on the phone," he <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">told</a> Kestenbaum. "The woman whom I talked to said, 'Well you can't do that sir,' and I said, 'Well yes I can!'"</p>
<p>The woman asked her supervisor, and sure enough, there was nothing wrong with collecting spousal benefits. The Solmans' money, about $1,000 a month, started arriving soon after, and eventually accumulated to roughly $50,000. Solman did not specify how long it took, but a simple calculation suggests that receiving $1,000 a month, he had about $50,000 in a little over four years.&nbsp;</p>
<p>The double benefits trick seems to be an accident of the law. The <a href="http://www.ssa.gov/history/law.html">Social Security act of 1935</a> was a complicated one, and several amendments have been made to it.</p>
<p>"Our impression is that it was not specifically intended that this opportunity would be provided," Stephen Goss, the Chief Actuary for the Social Security Administration, <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">told</a> Kestenbaum. "But it is definitely legal. It is definitely allowed. There is nothing wrong with people pursuing this."</p>
<p>Whether it be a loophole, accident, or mistake, it's costly. Goss&nbsp;estimated that this spousal benefit trick could cost the Social Security administration roughly $1 billion a year.</p>
<p><a href="http://www.npr.org/2015/05/15/407071543/obamas-new-budget-plan-proposes-closing-social-security-loophole">President Obama's current budget proposal calls for eliminating aggressive Social Security strategies</a> that benefit the wealthy, such as this one. Ultimately, "It will take an act of Congress to close the hole that it has created," says Kestenbaum.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/delay-claiming-social-security-benefits-2015-2" >Here's the last truly impactful choice most people will ever make with their money</a></strong></p>
<p><a href="http://www.businessinsider.com/social-security-spousal-benefit-2015-6#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/james-altucher-401k-strategy-investing-money-2015-4">JAMES ALTUCHER: Why investing in a 401(k) is a complete waste of money</a></p> http://www.businessinsider.com/social-security-spousal-benefit-2015-6A reporter scored $50,000 for retirement thanks to a loophole some couples could usehttp://www.businessinsider.com/social-security-spousal-benefit-2015-6
Sat, 20 Jun 2015 14:00:00 -0400Kathleen Elkins
<p><img style="float:right;" src="http://static4.businessinsider.com/image/55831d106bb3f737392d1750-1065-799/wealthy-old-couple-3.jpg" border="0" alt="Wealthy Old Couple"></p><p>A loophole in the Social Security Act could give married couples up to an extra $50,000, reports NPR correspondent David Kestenbaum in a <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">Planet Money podcast episode.</a></p>
<p>This loophole, which economist Larry Kotlikoff and reporter Paul Solman write about in their book, "<a href="http://www.amazon.com/Get-Whats-Yours-Secrets-Security/dp/1476772290">Get What's Yours: The Secrets to Maxing Out Your Social Security</a>," is all thanks to something called a spousal benefit.</p>
<p>"The spousal benefit dates back to the early days of the Social Security program, when women tended to stay at home and take care of the kids," <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">reports</a> Kestenbaum for NPR. "It was a way for wives to get something out of the Social Security as well as the husbands."</p>
<p>While you're waiting to collect your Social Security — which you can receive starting at age 62, but <a href="http://www.businessinsider.com/delay-claiming-social-security-benefits-2015-2">may want to defer until age 70 to get a much larger check</a> — you can also file for additional money: the spousal benefit.</p>
<p>The way the Social Security Act is written, one spouse can begin claiming regular benefits starting at age 62, while the other spouse claims spousal benefits. As the latter spouse gets this additional money, his or her standard benefits continue growing until claimed at age 70.</p>
<p>Before writing about this trick in "Get What's Yours," Solman did some research, found a few couples who did it, and decided to give it a whirl with his wife.</p>
<p>"I simply made a date to talk to the Social Security people on the phone," he <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">told</a> Kestenbaum. "The woman whom I talked to said, 'Well you can't do that sir,' and I said, 'Well yes I can!'"</p>
<p>The woman asked her supervisor, and sure enough, there was nothing wrong with collecting spousal benefits. The Solmans' money, about $1,000 a month, started arriving soon after, and eventually accumulated to roughly $50,000. Solman did not specify how long it took, but a simple calculation suggests that receiving $1,000 a month, he had about $50,000 in a little over four years.&nbsp;</p>
<p>The double benefits trick seems to be an accident of the law. The <a href="http://www.ssa.gov/history/law.html">Social Security act of 1935</a> was a complicated one, and several amendments have been made to it.</p>
<p>"Our impression is that it was not specifically intended that this opportunity would be provided," Stephen Goss, the Chief Actuary for the Social Security Administration, <a href="http://www.npr.org/sections/money/2015/06/10/413476238/episode-631-the-long-run">told</a> Kestenbaum. "But it is definitely legal. It is definitely allowed. There is nothing wrong with people pursuing this."</p>
<p>Whether it be a loophole, accident, or mistake, it's costly. Goss&nbsp;estimated that this spousal benefit trick could cost the Social Security administration roughly $1 billion a year.</p>
<p><a href="http://www.npr.org/2015/05/15/407071543/obamas-new-budget-plan-proposes-closing-social-security-loophole">President Obama's current budget proposal calls for eliminating aggressive Social Security strategies</a> that benefit the wealthy, such as this one. Ultimately, "It will take an act of Congress to close the hole that it has created," says Kestenbaum.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/delay-claiming-social-security-benefits-2015-2" >Here's the last truly impactful choice most people will ever make with their money</a></strong></p>
<p><a href="http://www.businessinsider.com/social-security-spousal-benefit-2015-6#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/james-altucher-401k-strategy-investing-money-2015-4">JAMES ALTUCHER: Why investing in a 401(k) is a complete waste of money</a></p> http://www.businessinsider.com/loophole-in-audible-lets-you-download-unlimited-audio-books-free-2014-9A Loophole In Audible Allows Anyone To Download Unlimited Audio Books For Free (AMZN)http://www.businessinsider.com/loophole-in-audible-lets-you-download-unlimited-audio-books-free-2014-9
Mon, 15 Sep 2014 07:31:00 -0400James Cook
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5416c98a6bb3f72c0c3a412a-862-647/broken-lock-1.jpg" border="0" alt="Broken Lock"></p><p>A teenager in India has discovered a major loophole in Amazon-owned audio book retailer Audible that allows anyone to download an unlimited amount of audio books for free.</p>
<p>Security flaws in Audible mean the site doesn't wait to authenticate credit card payments before allowing users to purchase books, meaning that anyone can provide the site with fake information and download an unlimited amount of audio books.</p>
<p>In a video provided to Business Insider, Alan Joseph, a 19-year-old computer science student from Bangalore, India, demonstrated the loophole. Business Insider was able to replicate the technique used by Joseph to download audio books for free.</p>
<p><span style="line-height: 1.5em;">Using a fake name, fake email address and a fake credit card, users are able to create an account on Audible, and purchase any member program. Business Insider was able to purchase the most expensive membership program, a $229 24-book "Platinum Annual Membership," using fake credit card information.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static3.businessinsider.com/image/5416bf946da8119c2f06f4b1-955-493/screen shot 2014-09-15 at 11.10.58.png" border="0" alt="Amazon Audible loophole screenshot"><br></span></p>
<p><span style="line-height: 1.5em;">After the membership is applied to an account, users are given a number of credits to purchase books as part of the membership. Despite using randomized fake card details, the credits are still applied to accounts.</span></p>
<p><span style="line-height: 1.5em;"><img src="http://static5.businessinsider.com/image/5416c03fecad04aa313a4129-1068-542/screen_shot_2014-09-15_at_11_30_45.png" border="0" alt="Audible loophole screenshot showing credits from membership program"><br></span></p>
<p><span style="line-height: 1.5em;">Amazon only checks the credit card information after a user "buys" an audio book using a credit gained from a membership program purchased using a fake credit card.&nbsp;</span></p>
<p><img src="http://static3.businessinsider.com/image/5416c18e6da8117e3e06f4b1-1039-554/screen_shot_2014-09-15_at_11_34_09.png" border="0" alt="Audible screenshot showing card renewal trick" style="line-height: 1.5em;"></p>
<p>But the warning that Amazon displays after attempting to verify the payment is easily avoided. All users need to do is renew their membership using the fake card information and they have more credits to buy audio books with.</p>
<p><img src="http://static6.businessinsider.com/image/5416c262eab8eac4610c3930-1050-447/screen_shot_2014-09-15_at_11_40_12.png" border="0" alt="Audible loophole screenshot"></p>
<p><span style="line-height: 1.5em;">Emails shown to Business Insider reveal that Amazon and Audible were first made aware of the exploit in March 2013, yet failed to respond to repeated warnings about the loophole.</span></p>
<p>&nbsp;</p>
<p><span>In a statement to Business Insider, Audible emphasized that customer data was not at risk due to the loophole in the site, remarking "This is a fraud issue, not a security issue. The fraudulent activity did not put any customer data at risk of exposure, nor did it affect customer experience in use of Audible.com; no honest Audible customer has been or will be injured by this. While we are constantly working to improve ease of use by customers, any momentary breach is closed quickly through our process when invalid credit cards are used. We take the act of fraud very seriously—and always have and always will."</span></p>
<p><span style="line-height: 1.5em;">If Audible checked credit card information before providing accounts with book credits, then the loophole wouldn't work. But the site has a relaxed approach to security, allowing users to sign up with fake email addresses and purchase items without so much as verifying the email address used.</span></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/security-holes-in-secret-2014-8" >Hackers Have Found 42 Security Holes In Anonymous App Secret</a></strong></p>
<p><a href="http://www.businessinsider.com/loophole-in-audible-lets-you-download-unlimited-audio-books-free-2014-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/california-overturns-controversial-rape-law-2013-9California Fixes Law That Said Pretending To Be A Woman's Boyfriend To Have Sex With Her Isn't Rapehttp://www.businessinsider.com/california-overturns-controversial-rape-law-2013-9
Wed, 11 Sep 2013 17:23:16 -0400Pamela Engel
<p><img style="float:right;" src="http://static5.businessinsider.com/image/51c880ca69beddcc33000004-480-/bed-sheets-sleeping-1.jpg" border="0" alt="bed sheets sleeping " width="480" /></p><p>California <a href="http://abclocal.go.com/kgo/story?section=news/politics&amp;id=9242462">has finally fixed</a> an 1872 law that led a court to throw out a rape conviction on the basis that the female victim wasn't married at the time of her rape.</p>
<p>Earlier this year,&nbsp;California's Second District Court of Appeals <a href="http://www.businessinsider.com/julio-morales-rape-case-appeal-ruling-2013-1">granted a retrial</a> for a man, <span>Julio Morales,</span>&nbsp;who snuck into a woman's bed, pretended to be her boyfriend, and raped her.</p>
<p><span>Because the woman wasn't married at the time, the court "reluctantly" held that it wasn't legally defined as rape.</span></p>
<p>Here's an excerpt from the court's ruling, <a href="http://blogs.laweekly.com/informer/2013/01/_julio_morales_rape_district_court_ruling_cerritos_los_angeles_california_sleeping_mistaken_for_boyfriend_case.php">courtesy of</a> LA Weekly:</p>
<p style="padding-left: 30px;"><span><span>A man enters the dark bedroom of an unmarried woman after seeing her boyfriend leave late at night, and has sexual intercourse with the woman while pretending to be the boyfriend. Has the man committed rape? Because of historical anomalies in the law and the statutory definition of rape, the answer is no, even though,&nbsp;</span><strong>if the woman had been married and the man had impersonated her husband, the answer would be yes</strong><span>.</span></span></p>
<p>California's code previously stated that&nbsp;a crime was rape if the victim was unconscious or asleep or "submits under the belief that the&nbsp;<a href="http://codes.lp.findlaw.com/cacode/PEN/3/1/9/1/s261">person committing the act is the victim's spouse</a>." In this case, the woman simply thought the man having sex with her was her boyfriend, not her husband.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">On Monday, California Gov. Jerry Brown signed a bill that closes the loophole. It was apparently a <a href="http://arc.asm.ca.gov/member/AD35/?p=pr">three-year effort</a> to get the bill passed and signed into law.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">California law now clarifies that "an attacker who coerces a victim into sexual activity by impersonating somebody else can be prosecuted for felony rape," according to a state lawmaker's </span><a href="http://arc.asm.ca.gov/member/AD35/?p=pr">news release</a><span style="font-size: 15px; line-height: 1.5em;">.</span></p><p><a href="http://www.businessinsider.com/california-overturns-controversial-rape-law-2013-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/irs-eyes-basket-options-tax-loophole-2013-7The IRS Is Getting Serious About Cracking Down On Another Cherished Hedge Fund Tax Loopholehttp://www.businessinsider.com/irs-eyes-basket-options-tax-loophole-2013-7
Mon, 01 Jul 2013 14:38:00 -0400Linette Lopez
<p><img style="float:right;" src="http://static1.businessinsider.com/image/51d1c2376bb3f7d41f00001d-480-/james-simmons.png" border="0" alt="james simmons" width="480" /></p><p>Legendary hedge fund manager James Simons has caught the ire of Wall Street's friends at the IRS by using a tax cutting strategy&nbsp; known as basket options contracts, <a href="http://www.bloomberg.com/news/2013-07-01/simons-strategy-to-shield-profit-from-taxes-draws-irs-ire.html">Bloomberg reports.</a></p>
<p>Simons, a Cold War code breaker turned billionaire and founder of quant firm Renaissance Technologies, has been using the strategy on his $10 billion flagship Medallion fund, according to people with knowledge of the situation.</p>
<p>One former Renaissance employee said the IRS contacted him to let him know he may have to pay $90,000 in additional taxes. (Woof)</p>
<p>The employee was then assured, by his former employer, that the practice was perfectly legal and used by a bunch of hedge funds.</p>
<p>Here's how basket options contracts work: By nature, firms like Renaissance do not hold investments for a long time, but wages and investments held for less than a year are taxed at a rate of 39.6%. Those held for 2 years or more, on the other hand, are charged at the 20% capital gains rate.</p>
<p>So to turn those short term investments in to long term investments, foreign banks like Deutsche Bank and Barclays buy a basket of securities that hedge funds want to sell. Then they hire the hedge funds to oversee that portfolio.</p>
<p>Then the fund (in this case Medallion) buys a two year option linked to the portfolio <a href="http://www.bloomberg.com/news/2013-07-01/simons-strategy-to-shield-profit-from-taxes-draws-irs-ire.html">(from Bloomberg):</a></p>
<p style="padding-left: 30px;">Medallion could claim it owned just one asset -- the option -- which it held for more than a year, allowing any gain to be treated as &ldquo;long-term&rdquo; when its investors reported the income on their personal tax returns...</p>
<p style="padding-left: 30px;">Tax planners started using derivatives to convert hedge funds&rsquo; short-term gains to long-term gains in the 1990s, said <a href="http://www.law.columbia.edu/fac/Alex_Raskolnikov" title="Open Web Site" rel="external">Alex Raskolnikov</a>, a tax professor at Columbia University Law School. Congress tried to close the loophole in 1999, enacting a law allowing the IRS to disregard the tax effect of some derivatives, such as swaps and forwards, if they were economically akin to owning the fund directly.</p>
<p>The IRS wrote a<a href="http://www.irs.gov/pub/irs-utl/am2010005.pdf"> memo about this practice in 2010, and called it an "end run".</a></p>
<p>A Renaissance spokesman declined to comment saying that &ldquo;the dispute is ongoing and being handled in the appropriate forum.&rdquo;</p>
<p><a href="http://www.bloomberg.com/news/2013-07-01/simons-strategy-to-shield-profit-from-taxes-draws-irs-ire.html">For the full story, head to Bloomberg&gt;</a></p><p><a href="http://www.businessinsider.com/irs-eyes-basket-options-tax-loophole-2013-7#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/tax-loophole-congress-google-apple-microsoft-2012-12Nobody In Congress Dares To Close The Trillion Dollar Loophole That Apple, Google And Microsoft Use To Reduce Taxes http://www.businessinsider.com/tax-loophole-congress-google-apple-microsoft-2012-12
Thu, 06 Dec 2012 14:56:00 -0500Walter Hickey
<p><img style="float:right;" src="http://static2.businessinsider.com/image/50c0ae0deab8eadb4100000e-400-/us-tax-burden-corporate-payroll-individual.png" border="0" alt="US Tax burden corporate payroll individual" width="400" /></p><p>One recurring theme of the fiscal cliff debate is the desire to close certain loopholes in the tax code.</p>
<p>Still, almost nobody in Washington has brought up closing one of the most significant loopholes&nbsp;<span>&ndash; the Subpart F corporate tax loophole, which was&nbsp;</span><a href="http://api.viglink.com/api/click?format=go&amp;key=9292a89875833d3830a2d19c626b7012&amp;loc=http%3A%2F%2Fwww.huffingtonpost.com%2F2012%2F09%2F20%2Fmicrosoft-taxes-profits-offshore_n_1901398.html&amp;v=1&amp;libid=1354803957810&amp;out=http%3A%2F%2Fwww.hsgac.senate.gov%2Fdownload%2F%3Fid%3D7B9717AF-592F-48BE-815B-FD8D38A71663&amp;title=Apple%2C%20Google%2C%20Microsoft%20Avoid%20Taxes%20By%20Keeping%20Billions%20In%20Profits%20Offshore%3A%20Senate%20Report&amp;txt=Senate%20subcommittee%20report&amp;jsonp=vglnk_jsonp_13548048772342">detailed in a Senate report</a>&nbsp;released in late September.&nbsp;</p>
<p>According to the report, that loophole is a major reason that the share of federal revenue derived from corporate taxes is a third of what it was in 1952.</p>
<p>Here are the stats: American multi-national corporations have more than $1.7 trillion in undistributed foreign earnings &mdash; some of which is deliberately held offshore to defer taxation &mdash; and taken as a whole, keep at least 60 percent of their cash overseas.</p>
<p>The corporate tax rate is a flat 35 percent, but companies with controlled foreign companies have a way to bring that rate down.&nbsp;</p>
<p><img style="float:right;" src="http://static6.businessinsider.com/image/50c0af246bb3f7763b000004-566/foreign-tax-shelters.png" border="0" alt="foreign tax shelters" width="400" />The investigation explains that, to exploit the loophole, a company will "sell" their intellectual property rights to a foreign, controlled company in a tax shelter.</p>
<p>That controlled foreign company gains the profits from domestic and international sales without the burden of American taxation, since the income is considered active.</p>
<p>The multinational will then occasionally repatriate some of the income through permissible short term loans between the controlled foreign company and the American corporation.&nbsp;</p>
<p>Meanwhile, the main multinational uses the foreign-held corporation as a tax-free bank account.&nbsp;</p>
<p>The issue is, the intellectual property was mostly developed in the U.S., and these companies are keeping mountains of untaxed cash reserves offshore. For instance, according to the report <a class="hidden_link" href="http://www.businessinsider.com/blackboard/microsoft">Microsoft</a> kept <em>half</em> of their retail sales revenues offshore between 2010 and 2011.&nbsp;</p>
<p>Here are the top companies with offshore cash reserves exceeding $5 billion:</p>
<p><img src="http://static1.businessinsider.com/image/50c0af6269bedda459000002-595-605/picture 2-127.png" border="0" alt="offshore profits" /></p>
<p>You'll notice a couple things.&nbsp;</p>
<ul>
<li>There are, among these 18 companies alone, upwards of $378.5 billion dollars kept offshore.&nbsp;</li>
<li>Most of these companies are tech, pharmaceutical, or medical technologies companies &mdash; industries where patents and intellectual property define the business model.</li>
<li>Some companies like <a class="hidden_link" href="http://www.businessinsider.com/blackboard/hp">HP</a>, <a class="hidden_link" href="http://www.businessinsider.com/blackboard/cisco">Cisco</a>, Microsoft, Coca-Cola and Johnson &amp; Johnson keep all or almost all of their cash offshore.&nbsp;</li>
</ul>
<p>Here's the main point: Both sides have talked about closing loopholes in the tax code.&nbsp;At the same time, both sides have taken vast amounts of money from all of these companies. The companies have been <a href="http://www.opensecrets.org/lobby/top.php?indexType=s">aggressive lobbyists</a> and &mdash; especially with <a href="http://www.opensecrets.org/pacs/industry.php?txt=B12&amp;cycle=2010">technology</a> and <a href="http://www.opensecrets.org/pacs/industry.php?txt=H04&amp;cycle=2010">pharmaceuticals</a> &mdash; very generous campaign donors.&nbsp;</p>
<p>That's one of the reasons that Subpart F hasn't been an issue in the fiscal cliff talks. While everyone loves to talk about closing loopholes, nobody wants to close the big ones that are used by powerful entities.</p><p><a href="http://www.businessinsider.com/tax-loophole-congress-google-apple-microsoft-2012-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/flying-with-weed-may-be-ok-in-some-cases-2012-11It's (Sort Of) OK To Fly Between Colorado And Washington With Your Weedhttp://www.businessinsider.com/flying-with-weed-may-be-ok-in-some-cases-2012-11
Fri, 30 Nov 2012 11:34:28 -0500Aleksi Tzatzev
<p><img style="float:right;" src="http://static3.businessinsider.com/image/50b8de99eab8ea5d45000008/airport-security.jpg" border="0" alt="airport security" /></p><p>Now that both Colorado and Washington have legalized marijuana, pot smokers might be wondering whether they can fly between the two states with their weed.</p>
<p>Well, yes, sort of.</p>
<p>The Transportation Security Administration&nbsp;<a href="http://blogs.westword.com/latestword/2012/11/marijuana_tsa_flying_colorado_washington.php?page=2">told the Denver Westword this week</a> that its agents don't really make it a priority to look for marijuana during passenger screenings. But if they do find any, they will refer the case to <a href="http://blogs.westword.com/latestword/2012/11/marijuana_tsa_flying_colorado_washington.php">local authorities</a>, according to Denver Westword.</p>
<p>Those authorities probably won't care about the weed since they'll be in a state where it's legal.</p>
<p>In a statement, the TSA also reminds Westword that if it thinks your weed poses any security threats, agents still have the final call on whether to allow it on board.&nbsp;</p>
<p>Basically, the TSA isn't really concerned with your weed unless it deems it somehow dangerous.</p>
<p><strong>SEE ALSO:</strong> <a href="http://www.businessinsider.com/colorado-employee-pot-case-2012-11">A Dish Network Lawsuit Could Have A Huge Impact On Pot-Smoking Workers &gt;</a></p><p><a href="http://www.businessinsider.com/flying-with-weed-may-be-ok-in-some-cases-2012-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/no-one-talks-about-this-tax-break-2012-11The Most Important Tax Break Is The One No One Talks Abouthttp://www.businessinsider.com/no-one-talks-about-this-tax-break-2012-11
Mon, 19 Nov 2012 19:17:00 -0500James Kwak
<p><img style="float:right;" src="http://static2.businessinsider.com/image/507c691d69bedd5652000002-400-/rich-kids-of-instagram-bill.png" border="0" alt="rich kids of instagram bill" width="400" /></p><p>Suddenly, Republicans are all about increasing tax revenues from rich people.</p>
<p>In the last weeks of the campaign, <a href="http://www.businessinsider.com/blackboard/mitt-romney" class="hidden_link">Mitt Romney</a> talked about capping itemized deductions for high-income taxpayers (which, unfortunately for his arithmetic, would not nearly have compensated for the lower tax rates he proposed).</p>
<p><a href="http://www.businessinsider.com/blackboard/john-boehner" class="hidden_link">John Boehner</a> has told his caucus that they have to be willing to accept increased tax revenues (but out of the other side of his mouth says that tax rates cannot be increased).</p>
<p><a href="http://www.businessinsider.com/blackboard/glenn-hubbard" class="hidden_link">Glenn Hubbard</a>, in the <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.ft.com%2Fintl%2Fcms%2Fs%2F0%2F66564c38-2cbd-11e2-9211-00144feabdc0.html&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNEYG94EOxXn65I4sgYinDXQw9ZGjw">Financial Times</a>, also suggests increasing revenues by closing loopholes: "Tax deductions should be scaled back, especially in the areas of mortgage interest, charitable giving and employer-provided health insurance."</p>
<p>What do all of these proposals have in common?</p>
<p>They pass silently over the most important loophole for the rich: artificially low tax rates on investment income, whether capital gains (profits from sales of assets) or dividends (cash distributions from corporations to shareholders).</p>
<p>Why won't a limit on deductions solve this problem? Because itemized deductions, like those for mortgage interest or charitable contributions, are only one type of tax loophole.</p>
<p>Another is compensation that is not counted as income to begin with.It is "excluded," which is different from being "deducted" like employer-provided health benefits.</p>
<p>And another is simply applying a lower tax rate to certain types of income. Since 2003, both long-term capital gains (sales of assets held for over one year) and most dividends have been taxed at a maximum rate of 15 percent, while the top rate on "ordinary" income (from, you know, working) has been 37.9 percent, if you include the Medicare payroll tax.</p>
<p>This is why Mitt Romney, despite his hundreds of millions of dollars of wealth, pays a lower average tax rate than many middle income Americans.</p>
<p>The loophole for investment income is one of the biggest ones that exist, worth about $440 billion over the next five years (2013-2017).* If the goal is for rich people to pay more in taxes, this is the most important loophole to close. Lower rates on investment income overwhelmingly benefit not just the modestly affluent, but the super-rich.</p>
<p>According to the <a href="http://www.google.com/url?q=http%3A%2F%2Ftaxpolicycenter.org%2Fnumbers%2Fdisplayatab.cfm%3FDocID%3D3148%26topic2ID%3D60%26topic3ID%3D62%26DocTypeID%3D1&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHXOAaYh9PlO_xygrlokarU9mgFTQ">Tax Policy Center</a>, households that make more than $1 million make up just 0.3 percent of all households but reap 67 percent of the benefits of this one loophole. That shouldn't be surprising, because the investment assets that earn income mostly belong to the rich: the average million-dollar-plus household receives almost <a href="http://www.google.com/url?q=http%3A%2F%2Ftaxpolicycenter.org%2Fnumbers%2Fdisplayatab.cfm%3FDocID%3D3181%26topic2ID%3D60%26topic3ID%3D62%26DocTypeID%3D1&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHT3G7jiJM-F8oBJ9xKwymwTZGOqw">$800,000</a> in investment income. (Middle-class people own their houses, but the first $500,000 in capital gains from the sale of a house by a married couple are tax-free; and most middle-class people's stock investments are in tax-free retirement accounts.)</p>
<p>This is what the truly rich really care about. As I've<a href="http://www.google.com/url?q=http%3A%2F%2Fwww.theatlantic.com%2Fbusiness%2Farchive%2F2012%2F10%2Fthe-incredible-political-hypocrisy-of-americas-most-powerful-ceos%2F264157%2F&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNH1DJea6ciPOattKSkq3DKQJT2T2w"> written before</a>, the tax rate on capital gains is the most important line in the tax code for them. The employer health plan exclusion and the mortgage interest deduction are just peanuts, and they don't get some other deductions (like the state and local tax deduction) because of the alternative minimum tax.</p>
<p>Taxing income from investments the same as we tax income from labor would raise hundreds of billions of dollars in revenue almost exclusively from people who can afford it. So why isn't anyone considering it?</p>
<p>Republicans don't want to because, well, they are <a href="http://www.google.com/url?q=http%3A%2F%2Fmoney.cnn.com%2Fgalleries%2F2012%2Fnews%2Feconomy%2F1206%2Fgallery.super-pac-donors-politics%2Findex.html&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHfgCtwGVW8GQ_nBm_Avu75oBAnzw">the party of the super-rich</a>. Low taxes on investment income are the untouchable central plank of the Republican platform.</p>
<p>What about Democrats? President Obama has proposed letting the maximum rate on capital gains rise to 20 percent, where it was set in 1997 by President Clinton and then-Speaker <a href="http://www.businessinsider.com/blackboard/newt-gingrich" class="hidden_link">Newt Gingrich</a>, on households earning more than $250,000. But that's it. And now <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.nytimes.com%2F2012%2F11%2F13%2Fus%2Fpolitics%2Fdemocrats-like-a-romney-idea-to-cap-tax-deductions.html&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNH_R141kJW6mZ-Xvypd7KD_qU76Sg">Democrats</a> seem to be warming to the idea of limiting itemized deductions, which purports to raise taxes on the rich but is relatively trivial to the super-rich.</p>
<p>Instead, why don't they push for eliminating preferences for investment income, or at least raising the capital gains rate to 28 percent, where it was set by Ronald Reagan in 1986? They can't possibly think it would be bad for the economy, since the evidence for any relationship between capital gains rates and economic growth is <a href="http://www.google.com/url?q=http%3A%2F%2Feconomix.blogs.nytimes.com%2F2012%2F10%2F16%2Fromneys-tax-plan-and-economic-growth%2F&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNGMZG3wUgD3aHDnKNM9-b8-r2KWLw">dubious</a>.</p>
<p>Since the tax increase would only affect the very rich, it would have little impact on consumption and economic activity. And wouldn't it be great to fight for equal treatment of labor and capital, and a smaller national debt, at the same time?</p>
<p>My cynical instincts say that Democrats don't want to upset the hedge fund establishment any more than they already have. But Barack Obama, you will never run for re-election again. Now is your moment. Don't waste it.</p>
<p>*To estimate this properly, you have to add up two numbers from two different reports. The CBO estimates the impact of letting the 2003 tax cut expire (<a href="http://www.google.com/url?q=http%3A%2F%2Fcbo.gov%2Fpublication%2F43547&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHCuQD2QrgphJ4GzKhpVdmG4LE70w">row 86 in this spreadsheet</a>), which would restore the 20 percent rate set in 1997; the OMB estimates the impact of taxing capital gains not at 20 percent but at the same rate as ordinary income (<em><a href="http://www.google.com/url?q=http%3A%2F%2Fwww.whitehouse.gov%2Fomb%2Fbudget%2FSupplemental&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNFw1N0z4db9j0krmAF7Gm8mvax0kw">Tax Expenditures Spreadsheet, Table 17-1, row 99</a></em>). This calculation leaves aside some of the other egregious aspects of capital gains taxation, such as step-up of basis on death, which will cost $180 billion over the next five years</p><p><a href="http://www.businessinsider.com/no-one-talks-about-this-tax-break-2012-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/politicians-favorite-buzzwords-2012-11A Quick Guide To This Season's Political Buzzwordshttp://www.businessinsider.com/politicians-favorite-buzzwords-2012-11
Wed, 14 Nov 2012 18:21:00 -0500Howard Gleckman, Guest Blogger
<p><img style="float:right;" src="http://static3.businessinsider.com/image/4e6a4be2eab8ea1d40000012-400-300/biden-boehner.png" border="0" alt="Biden, Boehner" /></p><p>You can&nbsp;tell when Congress and the President have tough choices to make.</p>
<p>That&rsquo;s when they trot out the euphemisms&mdash;all aimed at making what they are about to do sound as benign as possible. &nbsp;</p>
<p>Case in point: the impending fiscal cliff.</p>
<p>If you listened to <a href="http://www.csmonitor.com/tags/topic/Barack+Obama" target="_self" class="inform_link">President Obama</a> and <a href="http://www.csmonitor.com/tags/topic/John+Boehner" target="_self" class="inform_link">House Speaker John Boehner</a>&rsquo;s radio addresses last Saturday, you got an earful of these weasel words, ranging from the merely misleading to the truly Orwellian.</p>
<p>Here are just a few:</p>
<p><strong>Closing tax loopholes:</strong>&nbsp;This is a favorite of both parties, but these days it is being used&nbsp;mostly by <a href="http://www.csmonitor.com/tags/topic/U.S.+Republican+Party" target="_self" class="inform_link">Republicans</a> who are looking for an alternative to raising tax rates on high-income households. The phrase appears regularly in Boehner&rsquo;s presentations.&nbsp;</p>
<div class="promotion-tag">
<p class="promotion-tag-p"><a href="http://www.csmonitor.com/USA/DC-Decoder/2012/0523/Could-fiscal-cliff-push-US-into-recession-Four-questions-answered" target="_blank">RELATED: Could 'fiscal cliff' push US into recession? Four questions answered.</a></p>
</div>
<p>It is true that the tax code includes loopholes that should be closed. But these are narrow and usually unintended gimmicks that allow a handful of sophisticated taxpayers to avoid tax.</p>
<p>Congress will need to raise more than half-a-trillion dollars over a decade to protect top-bracket taxpayers from Obama&rsquo;s plan to let their tax breaks expire without adding to the deficit. To get there, it will need to cap popular, broad-based tax preferences, such as deductions for mortgage interest, charitable giving, and state and local taxes. It isn&rsquo;t going to get far by closing a few loopholes.</p>
<p><strong>Entitlements:</strong>&nbsp;When politicians use the word entitlement, they really mean <a href="http://www.csmonitor.com/tags/topic/Medicare" target="_self" class="inform_link">Medicare</a>, <a href="http://www.csmonitor.com/tags/topic/Medicaid" target="_self" class="inform_link">Medicaid</a>, and <a href="http://www.csmonitor.com/tags/topic/Social+Security" target="_self" class="inform_link">Social Security</a>. At least two of those programs, Medicare and Social Security, are enormously popular. So nobody talks about slowing the growth of these senior health care and pension programs. &nbsp;&ldquo;Entitlement&rdquo; carries with it a sense of privilege and greed. So much easier to cut en entitlement&nbsp;than to trim promised Social Security benefits.</p>
<p><strong>Shoring up entitlement programs.</strong>&nbsp;&nbsp;This is another Boehnerism. &nbsp;It is not enough, it seems, to say entitlement instead of Medicare and Social Security.&nbsp; Now, pols insist they are &ldquo;shoring up&rdquo; these programs when they really mean they want to trim promised benefits. For programs that are funded through trust funds, such as Social Security and Medicare Part A, &ldquo;shoring up&rdquo; has some meaning (assuming you believe in the trust fund concept at all). But for the rest of Medicare and all of Medicaid, there is nothing to shore up.</p>
<p>These programs are funded through general revenues or, in the case of Medicare, general revenues plus premiums and co-pays. By spending less than government currently expects, you don&rsquo;t strengthen them. &nbsp;They are being shorn, not shored up.</p>
<div class="promotion-tag">
<p class="promotion-tag-p"><a href="http://www.csmonitor.com/USA/DC-Decoder/2012/0523/Could-fiscal-cliff-push-US-into-recession-Four-questions-answered" target="_blank">RELATED:&nbsp;Could 'fiscal cliff' push US into recession? Four questions answered.</a></p>
</div>
<p><strong>Making people like me pay a little more:</strong>&nbsp;This was an Obama favorite in the campaign. And it never seems to go away. The <a href="http://www.csmonitor.com/tags/topic/Tax+Policy+Center" target="_self" class="inform_link">Tax Policy Center</a>&nbsp;<a href="http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3317" target="_blank">estimates</a>&nbsp;the top one percent of households (who make an average of about $1.7 million) would end up paying almost $94,000 more in taxes under Obama&rsquo;s 2013 budget, or about 6 percent of their income. I know these folks make a lot of money, and probably can manage this higher tax bill, but a nearly six-figure tax hike is a tad higher than &ldquo;a little more.&rdquo;</p>
<p>And it is worth noting that there&nbsp;are not very many people who make Obama-like money. &nbsp;In 2012, there will be only about a half-million households in the top two tax brackets (out of nearly 160 million).</p>
<p>All of this rhetoric is intended to make deficit reduction sound painless. Somebody else will pay&mdash;or Congress is not&nbsp;really cutting at all. That mush may have been useful in campaign season. But lawmakers have some obligation to prepare voters for what will be some tough decisions over the next few years. Honest talk is a good way to start.</p>
<div class="promotion-tag">
<p class="promotion-tag-p"><a href="http://www.csmonitor.com/USA/DC-Decoder/2012/0523/Could-fiscal-cliff-push-US-into-recession-Four-questions-answered" target="_blank">RELATED:&nbsp;Could 'fiscal cliff' push US into recession? Four questions answered.</a></p>
</div><p><a href="http://www.businessinsider.com/politicians-favorite-buzzwords-2012-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-best-legal-loopholes-2012-11Wisconsin Legal Loophole Lets 3-Year-Olds Drink In Barshttp://www.businessinsider.com/the-best-legal-loopholes-2012-11
Thu, 08 Nov 2012 14:38:26 -0500Abby Rogers
<p><img style="float:right;" src="http://static6.businessinsider.com/image/509c057decad040a25000009-400-300/kid-drinking.jpg" border="0" alt="kid drinking" width="400" height="300" /></p><p>If you want to learn how to keep your car from getting repossessed or whether you can serve your kids alcohol, just ask Reddit.</p>
<p>During one of the site's popular "Ask Me Anything" sessions, <a href="http://www.reddit.com/r/AskReddit/comments/12uosb/lawyers_of_reddit_what_are_some_interesting/" target="_blank">lawyers revealed all of the legal loopholes</a> you need to know.</p>
<p>By far, the Wisconsin <a href="http://www.dor.state.wi.us/faqs/ise/atundrg.html">drinking loophole takes</a> the cake:</p>
<ul>
<li>
<p>"You can legally drink with your parents anywhere alcohol is permitted regardless of age. My friend's 3 year old is a nasty whiskey drunk.</p>
</li>
<li>
<p>To clarify: "A parent (guardian) can serve their child alcohol. This can be at a bar, home, tailgating, etc... If at a bar, the parent must order the drink and be served the drink and, then, the parent can give the drink to the child. This all sounds well and good, but it gets messy when said child turns 18. At that point the parent is no longer the legal guardian, and cannot, legally, serve their child alcohol.</p>
</li>
</ul>
<p>Here are some of the other best loopholes Reddit taught us:</p>
<ul>
<li>
<p>"If you have knowledge that the loan company is coming to repossess your car, parking it on the neighbor's property will most likely not allow us to proceed. Contracts don't allow us to repossess from different addresses on the warrant, cars parked at the neighbors, we can't touch it."<em> (This came from a repossession agent, not a lawyer.)</em></p>
</li>
<li>
<p>"Remember the tax credit for electric vehicles? It was (is?) based on number of hours a battery held its charge. This led to golf carts getting about the same tax rebate as a full fledged car. All you needed to do was make it street legal with turn signals, mirrors, and seat belts. A new standard cart like that was basically free."</p>
</li>
<li>
<p>"What I've found interesting as a law student is how little liability waivers actually do. Basically, you can always sue someone, liability waiver or not. If it's their fault, it's their fault. (it gets a little more complicated, scope of consent, etc., but yeah, a lot looser than you'd think)."</p>
</li>
</ul>
<p><strong>DON'T MISS: <a href="http://www.businessinsider.com/marijuana-laws-and-the-prison-system-2012-11" target="_blank">Pot Legalization Changes Everything For Colorado And Washington Cops &gt;</a></strong></p><p><a href="http://www.businessinsider.com/the-best-legal-loopholes-2012-11#comments">Join the conversation about this story &#187;</a></p>